Question
You are considering two devices A and B. For Device A the initial cost is $25,000 and lasts for 8 years. Device B costs $45,000
You are considering two devices A and B. For Device A the initial cost is $25,000 and lasts for 8 years. Device B costs $45,000 and lasts for 4 years. If Device B is to be bought after a period of 4 years, the price will go up by 20%. The salvage on all machines can be safely taken as 20% of the initial cost.
Device A has yearly expenses of $2,000 which are estimated to go up by $1,000 per year, and the first year benefits are estimated to be $22,000 which are estimated to go down by $1,000 per year over its 8 year life.
Device B has yearly expenses of $3,500 which are estimated to go up by $1,000 per year, and the first year benefits are estimated to be $27,000 which are estimated to go down by $1,000 per year over its 4 year life. The costs and benefits keep trending with the same pattern even when a new copy of the option is installed further from where the old copy's costs and benefits ended.
What would be the difference in the EUAW of the Device A and B over an 8 year project life if interest rate is 6% per year compounded yearly?
$1,339 | ||
$2,484 | ||
$3,853 | ||
$4,576 |
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